San Jose In Deep Pension Mess

Steven Greenhut: Here’s the latest statement from the San Jose mayor regarding the city’s pension crisis. It’s good to see a big-city official championing this cause:

Statement from Mayor Reed on City Auditor’s Findings that San Jose’s Retirement Funds are $2 Billion Short

San Jose, Calif. – The City Auditor’s most recent report – “Pension Sustainability: Rising Pension Costs Threaten the City’s Ability to Maintain Service Levels – Alternatives for a Sustainable Future” – states that the City faces $5.4 billion in liabilities for guaranteed pension benefits for current employees and retirees and is $2 billion short in meeting those obligations.

Mayor Chuck Reed released the following statement:

The reality that we all must face is that our employee costs are unsustainable. Cities like San Jose are in the service business; as a result, employee costs are the largest part of our budget.

I believe San Jose has the best employees in the state. The impact of rising pension costs has meant that San Jose can’t hire more firefighters, police officers, librarians, gang intervention workers. As Mayor, I think our growing City needs to be providing more services, especially in these difficult economic times. The majority of our non-public safety unions stepped forward in June and shared the pain, giving up ten percent of total compensation and helping fund retirement payments.

We had to ask for that level of concession because of the growth in pension and employee costs. Over the last decade, San Jose’s general fund dollars have grown by 21%, while the average cost per employee has gone up by 87%. For public safety employees – firefighters and police officers – the increase is even more dramatic at 99%.

San Jose police and firefighters can retire at age 50, and the non-sworn employees can retire at 55.  In some instances, pension payments are greater than the salary employees received when they were working, with an annual 3% increase, lifetime health and dental insurance provided without annual payments, and a lump sum payment of hundreds of thousands of dollars for unused sick leave.

Our Charter requires us to provide city employees with a defined benefit retirement plan, a minimum employer match of over 250%, a retirement age of 55, and city guaranteed benefits for life based on final compensation.

Retirement costs have tripled over the last ten years. As a result, we have had to cut services to our residents and businesses year after year. These out-of-control costs are why we can’t keep all of our libraries, community centers, and swimming pools open. Many of these costs are the result of big pay and benefit increases awarded to our public safety unions by outside arbitrators. Sky-rocketing costs are also fueled by generous retirement benefits that are guaranteed in the City Charter.

The current system is unsustainable. Now is the time for the people of San Jose to get involved, work for fiscal reform, and ensure that funds go to the basic services we all need – like fixing potholes and protecting our neighborhoods.

The audit report is online at http://www.sanjoseca.gov/auditor/AuditReports/1010/1010.pdf. Sharon Winslow Erickson, the City Auditor, may be reached at (408) 535-1250.

SEPT. 30